US Economic Reports yesterday could only be described as solid with the ISM Non-Manufacturing Report was at a near 9-year high. The ADP Employment showed a rise in private sector payrolls of 209K which was not spectacular but at above 200K is strong. Then last night’s Fed Beige Book upped the positive growth language in how it described the performance of the US economy, including a positive outlook as briefing ahead of the Dec 16-17 FOMC Meeting. Meanwhile Euro-Zone data was broadly as expected with the Final Services PMIs revised and Retail Sales in October recording a partial 0.4% rebound after September’s -1.2% drop.
Despite good US data the US Dollar had a mixed performance across major currency pairs in the last 24 hours. The Dollar made gains against the Euro and the Yen while giving up some ground against Sterling and the Canadian Dollar, the latter after the BOC left rates on hold. Sterling benefited from a strong Services PMI print at 58.6 and a rather upbeat mid-year review from UK Chancellor Osbourne in his Autumn Statement.
The main economic event today will be the ECB Rate decision at 12.45 pm followed by ECB President Dragi’s press conference at 1.30 pm. The key today will be whether the ECB will sanction Sovereign Bond Purchases. The US will release its latest Weekly Jobless Claims also at 1.30 pm while later this afternoon the Fed’s Mester and Brainard are due to speak on Financial Stability.
December S&P 500
The S&P continues its relentless move higher and with the market now up solidly for the year, market bears are simply non-existent as shown by this week’s Investors Intelligence Advisors Survey. At just 13.9% the bearish cohort remains right near 27-year lows and this extreme reading coming on top of the second confirmed Hindenburg Omen (last Tuesday) in the past 10 weeks which makes this stock market an accident waiting to happen. I will continue with my strategy of selling rallies with tight stops until this market breaks which has paid nice dividends over the last four weeks.
However it did not work out yesterday as I was stopped out late in the day on my my 2067 short position at 2074 and I am now flat. If the S&P can break and close below 2049 I will then look to put on a more macro short position. Today I will again be a seller on any further rally to 2079/2085 with a 2089 stop.
Euro/USD
Today is a really big day for the Euro with the ECB rate announcement and Dragi press conference. The Euro is extremely oversold as shown by the latest Daily Sentiment Index Reading which came in at just 8% bulls. It is trading at the bottom of its Bollinger Band and Williams Index and is ripe for a rally if we get a surprise from the ECB today. The next main support is from 1.2230/1.2260 and I will be a buyer in this region with a 1.2195 stop. As I mentioned yesterday, I see the Euro trading down to at least 1.15 next year but given how oversold it is at this time I am expecting a rally first, to correct this oversold condition.
US Dollar Index
After I posted yesterday the Dollar traded higher to my 89.10 sell level. I am still short especially with the Dollar trading at the top of its Bollinger Band and Williams Index and given the expected volatility later today I will raise my stop on this position to 89.60.
December DAX
After I posted yesterday morning the Dax traded higher to my 9995 sell level. I am still short but given the importance and expected volatility surrounding the ECB and Dragi press conference, I have covered this position at 9990 as I want to be flat heading into these events. If the Dax rallies after the announcements I will again look to go short from 10070/10130 with a 10170 stop. I will still be a small buyer on any dip to 9850/9890 with a 9825 stop.
December FTSE
The FTSE continues to trade heavy with the market not helped by yesterday’s Autumn Statement from Chancellor Osbourne. Unfortunately after I posted, the market just missed my 6765 sell level by 10 points before being hit hard. The DAX/FTSE spread has now widened to a new all time high near 3400 points. Today I will lower my sell level slightly to 6750/6780 with a 6810 stop. The price action in the FTSE is telling me not to be long at this time and the market seems to me to be trading in the same heavy way as it was just before the September 19 previous top in Global Indices which led to a 10% drop 4 weeks later.
Dow Rolling Contract
Since the Dow started its mega rally from the October 15 lows it has not fallen on two consecutive days and with the breadth in the market becoming more and more narrow coupled with another confirmed Hindenburg Omen last Tuesday I am very nervous about this market. The idea that the stock market cannot make a major top in December is false. In 1968 a manic bull market topped on December 2 while the Nikkei famously made its all time high on December 31 1989 at 39000 and here we are 25 years later and the market is still only trading shy of 18000 despite massive intervention. I am still short at 17880 and if I am stopped out at 17920 I will again be a seller in front of 17970 with a 18020 stop.
December BUND
No change as I am still a small seller from 152.50/152.80 with the same 153.10 stop.
Gold Rolling Contract
No change as I still need Gold to close over 1212 for me to reset my long position. If this happens I will leave a 1199 stop.
Silver Rolling Contract
No change as I am still long from last Monday at 15.10 with the same 16.10 stop.
January NYMEX Crude
Crude just missed my 66.80 buy level before having a nice rally and I am still flat. It is still very oversold and today I will raise my buy level slightly to 67.00/67.30 with a tight 66.50 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer on any further dip to 6580/66.20 with a wider 64.95 stop.
Recent Comments